A Joinder agreement is used to add new parties to an agreement which may not be clear on the number of parties. However, a joinder may be done in any kind of contract. For example, if a company takes a loan and is later on sold to another entity, the buying entity may be added to the original loan agreement by way of a joinder agreement. It is also used to add new parties such as a sub-contractor or a beneficiary to an existing agreement. A joinder, hence, is not a commercial contract in itself, but is essential to give intent to a commercial contract.
Purpose of a Joinder Agreement
A joinder agreement is used primarily when an agreement has the possibility of having additional parties in the future. Typically, the identities of such parties cannot be ascertained at the time of signing the agreement. Such a contract serves the purpose of keeping the agreement dynamic and flexible. It saves time and costs which may arise if an agreement has to be re-negotiated and re-drafted every time a new party has to be added.
Inclusions in a Joinder Agreement
A joinder agreement includes the names of the parties to the original agreement, the names of the new parties to be added, the effective date when such parties would become a part of the original agreement, purpose behind the same, the rights and obligations conferred on the newly added parties, references to the original agreement and standard boilerplate terms such as waiver, choice of law, notices, remedies, severability and dispute resolution.
Key Terms of a Joinder Agreement
The following key terms should be included in a joinder agreement sample:
- Joinder and Assumption of obligations: This clause has the effect of the joining party accepting that he has read the original agreement and agrees to become a party to it and assume the given obligations.
- Binding effect: This clause makes the original agreement binding on the joining party.
- Joinder agreement NDA: this clause may be included in a joinder contract which would make the new party a party not only to the original contract but also to any non-disclosure agreements or NDAs signed between the parties.
- Recitals: The recitals in a joinder agreement, must contain references to the original agreement.
- Entire Agreement Clause: Though, this is a boilerplate clause, it assumes importance in the specific context of a joinder agreement. It is important that a joinder agreement be made part of the original agreement and the two together are read as one single agreement.
Drafting of a Joinder Agreement
Following guidelines may be followed to draft an effective joinder agreement template:
- References to the original agreements must be compulsorily made.
- Before drafting the joinder agreement, check if the original agreement provides for any other way of adding new parties.
- Refer to the specific Article/section/clause of the original agreement which would stand amended by way of the joinder.
- Make the original contract binding on the new party.
- Make sure to include the entire agreement clause to make the joinder agreement a part of the original agreement.
- State the purpose of the joinder.
Types of a Joinder Agreement
A joinder agreement form is typically used for the following:
- Limited liability agreements.
- Commercial contracts
- Operating agreements
- Partnership agreements
- Shareholders’ agreements
- Founders’ agreements
Pros of a Joinder Agreement
A joinder agreement has the following benefits:
- Saves time and costs of re-negotiating and re-drafting an entire agreement.
- Prevents disputes.
- Prevents the new party from raising allegations that it was not a party to the original contract and hence not liable under it.
- A joinder agreement may be drafted as a uniform template and customized to each agreement’s needs.
Sample Joinder Agreement
A joinder agreement acts as a bridge between the old parties to an agreement and the new parties to an agreement. It helps in adding new parties seamlessly and without any extra effort of negotiating each term with the new party again and again. It also gives the new party an opportunity to review the original
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